Ford Scraps $1.6 Billion Mexico Plant As Trump Threatens GM

Looks like Michigan is becoming the Silicon Valley of the autonomous and electric car industry.

Ford, GM, and American automotive factory workers would kindly like to thank you for buying so many F-150s and Silverados. Those high-profit vehicles keep production north of the border in the U-S-of-A. On the other hand, small cars like the Chevrolet Cruze have such razor-thin profit margins that it’s hard to justify building them where unions and minimum wage laws slice away black dollars. To voice his displeasure with the practice of shipping jobs south of the border to minimize losses, Donald Trump has taken to Twitter.

Trump previously threatened American automakers with import taxes as high as 35% for taking advantage of the North American Free Trade Agreement to build vehicles in Mexico and then send them to US dealerships tax free. Now, as his latest tweet indicates, Trump is going after GM. “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!,” tweeted Trump on the first Tuesday of the new year. According to The Detroit News, GM quickly retorted with, “All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio."

"GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.,” the automaker continued. Despite committing to US production of the Cruze sedan the General actually is planning on shifting production south of the border to further reduce costs. This past November, GM announced that it was cutting shifts and laying off workers at its Lordstown plant. This came in response to declining small car sales across the industry which has in turn caused a major backup of unsold small cars at GM (among many other automakers). It's unclear whether or not Trump’s words cause American automakers to act, but Ford's latest move would certainly lead one to believe so.

In a press conference with major ramifications on both sides of the border, Ford announced that it was canceling plans for a $1.6 billion plant in San Luis, Mexico, and instead rerouting $700 million of its budget to reinvest in its Flat Rock, Michigan, plant where the Mustang is built. Initially, it may seem as if Trump’s comments to GM, as well as his previous threats to the Blue Oval, spurred the shift in Ford's plans, but this isn't officially the case. CEO Mark Fields told Bloomberg in a televised interview that Ford was motivated by two separate factors. One of these is that sales of small cars, the same that are built in Mexico, have dropped dramatically, meaning that it's not as viable to invest in building them.

Ford clarified that the reinvestment isn't a reaction to Trump's comments by reminding viewers that it will continue to build the Focus at its Hermosillo, Mexico, plant in order to "improve company profitability." The second reason for the shift in investment is that, as has been predicted by everyone, the changing auto industry is demanding that automakers invest in autonomous cars and electric vehicle technology. That is the direction Flat Rock will head in. The money dump will go towards expanding and retooling the site for testing, development, and production of autonomous and electric technologies, further reinforcing the Detroit area's growing reputation as the Silicon Valley of automobile tech.

The expansion of the factory, will require the hiring of 700 new employees and will expand the line to have space for a new mass market autonomous vehicle and an all-electric SUV. These two new models will join the Mustang (which will go hybrid) and Lincoln Continental that are already built at the factory. As for GM, well it seems like business as usual despite Trump's threat. That was Ford's plan as well before things changed, though. GM CEO Mary Barra may change her mind like Mark Fields and Ford did. Tweets like this may seem to be one-off rants but they do paint the companies they target in a bad light. After all, no American company wants to be called out by the president-elect for sending jobs over the border or overseas.